5/18/2007 @ 1:00PM

And Starting to Bark

David Blech was a high-flying, wheeling-dealing New York biotechnology investor and underwriter who in 1992 made The Forbes 400 list with a net worth of $295 million. Then his solely owned D. Blech & Co. brokerage collapsed, after which he drew five years’ probation in 1999 for securities fraud, took personal Chapter 7 bankruptcy and was banned from much of the securities industry. But now Blech, 51, is mounting a comeback. “I’m a second act,” he tells FORBES.

Intellect Neurosciences, a two-year-old New York City firm developing multiple Alzheimer’s treatment drugs that just went public in a reverse merger, revealed in a recent filing that Blech’s family owns 14% and that Blech himself “provides significant consulting services.” Other filings show the Blechs also have amassed $25 million of penny-stock holdings in several other firms:
Stem Cell Innovations
,
MedaSorb Technologies
,
Novelos Therapeutics
and
Xechem
. All are the same kind of small, fledgling, high-risk biotech outfits Blech specialized in before his dramatic fall–many of which are still around.

Intellect’s latest quarterly report lists no revenue and a negative $17 million net worth. Intellect Chief Executive Daniel G. Chain, a veteran Alzheimer’s researcher (and a son of Nobel Prize-winning biochemist Ernst B. Chain) calls Blech a “white angel investor,” who helped him organize the company, settle lingering debts from a previous research venture, find $12 million to maintain a research laboratory in Israel and arrange the reverse merger. Still, Intellect, which is now seeking a stock exchange for its 35 million shares, details in filings Blech’s rather colorful background, even warning it “may delay or impede access to listing our common.”

The soft-spoken Blech, a musician by training before turning to finance, muses, “I made quite a few mistakes that led to my problems, but I always tried to help the companies I was backing.” He says he stayed in touch with old backers still “willing to listen” to his investment pitches. Working from a home office in Manhattan, Blech declares, “I like being an underdog.”–William P. Barrett

Spinning Their Wheels

Since late March Coates International shares are up 725% to a recent $1.40, implying a $375 million market cap. The Wall, N.J. firm has patents on a rotary engine it hopes to develop commercially. But meantime, annual losses have reached $1.7 million, sufficiently troubling that the eight-employee company (three of them Coates family members) says it has started a “cost reduction program.” Some items over the years: fees paid to
Coates Precision Engineering
, also run by boss George J. Coates, and purchase of his son’s motorcycle business. Coates père says there’s “lots” of interest in his device and the stock price is still way too low. –Matthew Rand

IRS Didn’t Czech It Out

In the five weeks to Apr. 13 the Internal Revenue Service sent upward of $300,000 worth of one-time $30 federal telephone tax refunds to a single JPMorgan Chase Bank account in Ohio on behalf of at least 10,000 different taxpayers. An IRS lawsuit in Columbus, which led to a freeze on the account, alleged that one Ivo Brabec, listing an address in Edina, Minn. but “believed to be in the Czech Republic,” filed the refund requests, then asked the bank to send the money overseas. The bank blew the whistle to the feds. In an e-mail filed in court Brabec says he prepares tax returns for expatriates and did nothing wrong but admits he can’t produce signed authorizations for all of the requests. –Janet Novack

Boola Boola to Moola

A new academic study suggests portfolios of mutual fund managers who invest in companies run by fellow college alums outperform by up to 8.4% a year. Biz profs Lauren Cohen, Andrea Frazzini and Christopher Malloy looked at the performance of 2,500 managers running 1,650 domestic equity funds from 1990 to 2006. They also found managers tended to place “larger bets” on firms with those school ties. Their conclusion: Such “social networks may be an important mechanism for information flow into asset prices.” –Daniel Fisher